Argentina Gains Breathing Room Despite Loss

Argentina Gains Breathing Room Despite Loss

August 26, 2013

Argentina was seen as gaining a bit of time in Friday’s US court decision rejecting its appeal of a previous order to pay houldout creditors. The court said it would delay enforcement to allow the US Supreme Court to determine if it might hear the case. The decision, awaited for months, means the sovereign is still required to pay holdout creditors demanding $1.33bn just as it pays its restructured bondholders. “The second district appellate court provided some breathing room to Argentina, extending the stay of execution pending the Supreme Court review of their petition,” Siobhan Morden, head of Latin America strategy at Jefferies, tells LatinFinance. The acceptance rate is quite low for most cases but a petition from a sovereign state amidst international lobbying provides an advantage to Argentina, she adds. “Argentina was already trading with improving optimism of the legal risks over the past two months, but we assume that this optimism recovers as the markets expect that the appeal process will continue,” Morden says. “For Argentina the immediate takeaway is time,” Anna Gelpern, professor at Georgetown Law School, tells LatinFinance. The court also noted Friday that Argentina’s June petition to the Supreme Court was premature. If Argentina gets to file again and have it reconsidered, months could be added to the process. “I don’t think it’s a stretch to say we could be looking into 2015, at which point we’re looking at political transition potentially [in the next Presidential elections] in Argentina. It’s clearly a defeat, but it could be a while before they start having to worry about it,” she says. If the matter is taken by the Supreme Court, Barclays sees a decision mid-2014 at the soonest or mid-2015 at the latest. “Under a final negative outcome, we are of the view that the authorities will attempt an uncertain workaround of US court orders, to attempt to reduce the political costs associated with the failure of 2005 and 2010 restructuring and the misste

Argentina was seen as gaining a bit of time in Friday’s US court decision rejecting its appeal of a previous order to pay houldout creditors. The court said it would delay enforcement to allow the US Supreme Court to determine if it might hear the case. The decision, awaited for months, means the sovereign is still required to pay holdout creditors demanding $1.33bn just as it pays its restructured bondholders. “The second district appellate court provided some breathing room to Argentina, exten